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Balance of Payments

A key feature of New Zealand's current account deficit is the large deficit on the primary income balance, reflecting New Zealand's net international investment position which stood at -64.3% of GDP in the year to September 2014. The investment income deficit narrowed markedly after 2008, driven by lower profits accruing to overseas-owned firms in New Zealand as a result of weak domestic trading conditions, and lower interest payments flowing to holders of New Zealand debt. The goods and services balance has varied historically due to weather conditions, commodity price fluctuations, large one-off imports and currency movements, as well as New Zealand's demand for imports and international demand for New Zealand exports.

The current account deficit fell to 1.5% of GDP in the year ended March 2010, owing to weak domestic demand (which weighed on imports), a recovery in international demand for New Zealand exports and a shrinking investment income deficit. In 2011 and 2012 the deficit widened again, owing to a wider income deficit and a narrower goods and services surplus, the latter driven by falling commodity prices and a rising exchange rate. The deficit was relatively steady over most of 2013, as the effect of rising commodity export prices was offset by lower growth in export volumes due to the late-summer drought. The deficit narrowed to 2.6% in the year to September 2014, reflecting the recovery in agricultural export volumes and high export prices.

The current account deficit is expected to widen again to around 6% by mid-2015, owing to lower commodity export prices, increased imports related to the Canterbury rebuild and higher profit outflows.

Net international liabilities fell to 65.5% of GDP in March 2011 as a result of smaller current account deficits, valuation changes and revisions, and outstanding reinsurance claims related to the Canterbury earthquakes. Net international liabilities as a percentage of GDP widened again in the remainder of 2011 as the current account deficit increased, and were broadly steady in 2012, before a significant improvement over 2013 and 2014. Net international liabilities fell to 64.3% of GDP in the September quarter 2014, the lowest since 2001, owing to declines in the current account deficit, a revaluation of New Zealand's overseas assets and a reduction in the value of overseas liabilities. However, net international liabilities are expected to increase over the medium term as the current account deficit widens.

Table 17 - Balance of Payments
Year Ended 30 September
(dollars amounts in millions)
2010 2011 2012 2013 2014

Current Account

Export receipts 42,105 47,257 47,269 46,363 51,538
Import receipts 39,336 44,767 46,562 46,727 48,463
Merchandise balance 2,770 2,490 736 -363 3,075
Services balance 2,143 1,215 1,357 1,045 1,427
Income balance -9,894 -10, 269 -9,585 -8,679 -10,084
Transfers balance 109 -211 -364 -478 -506
Current account balance -4,827 -6,775 -7,857 -8,746 -6,090
Deficit as % of GDP  -2.4% -3.3% -3.7% -3.9% -2.6%
Net International Investment Position(1) -149,394 -146,525 -148,884 -147,579 -152, 277
NIIP as % of GDP (1) -75.7% -71.0% -69.9% -67.1% -64.3%

Financial Account (net)

Foreign investment in NZ  11,358 17,539 -5,005 -513 12,544
less NZ investment abroad 11,368 17,605 -10,545 367 9,359
Financial account balance -10 -66 5,490 -880 3,185

Capital Account

Balance of Capital Account 5,810 14,065 23 11 13

(1) End of period

Source: Statistics New Zealand

Figure 4 - Balance of Payments
Figure 4 - Balance of Payments.
Sources: Statistics New Zealand, the Treasury
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